What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-26 compared with 2022-04-28 · 115 added, 75 removed, 522 unchanged (27% of the section changed)

29 unchanged sentences

(000’s omitted, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Home sale revenues $ 3,809,601 $ 3,235,379 $ 6,879,914 $ 5,831,889

25 unchanged sentences

($000’s omitted)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Net income $ 652,435 $ 503,399 $ 1,107,158 $ 807,506

11 unchanged sentences

Earnings Total

Shareholders' equity, March 31, 2022 239,622 $ 2,396 $ 3,309,912 $ ( 20 ) $ 4,100,976 $ 7,413,264

Share issuances 48 — — — — —

Dividends declared — — — — ( 35,514 ) ( 35,514 )

Share repurchases ( 7,100 ) ( 70 ) — — ( 294,157 ) ( 294,227 )

Cash paid for shares withheld for taxes — — — — — —

Share-based compensation — — 9,238 — — 9,238

Net income — — — — 652,435 652,435

Other comprehensive income — — — 20 — 20

Shareholders' equity, June 30, 2022 232,570 $ 2,326 $ 3,319,150 $ — $ 4,423,740 $ 7,745,216

Shareholders' equity, December 31, 2021 249,326 $ 2,493 $ 3,290,791 $ ( 45 ) $ 4,196,276 $ 7,489,515

6 unchanged sentences

Other comprehensive income — — — 45 — 45

Shareholders' equity, March 31, 2022 239,622 $ 2,396 $ 3,309,912 $ ( 20 ) $ 4,100,976 $ 7,413,264

Shareholders' equity, June 30, 2022 232,570 $ 2,326 $ 3,319,150 $ — $ 4,423,740 $ 7,745,216

Capital Accumulated

2 unchanged sentences

Earnings Total

Shareholders' equity, March 31, 2021 263,637 $ 2,636 $ 3,274,154 $ ( 120 ) $ 3,408,604 $ 6,685,274

Share issuances 12 — — — — —

Dividends declared — — — — ( 36,814 ) ( 36,814 )

Share repurchases ( 3,582 ) ( 36 ) — — ( 199,964 ) ( 200,000 )

Cash paid for shares withheld for taxes — — — — ( 41 ) ( 41 )

Share-based compensation — — 6,625 — — 6,625

Net income — — — — 503,399 503,399

Other comprehensive income — — — 25 — 25

Shareholders' equity, June 30, 2021 260,067 $ 2,600 $ 3,280,779 $ ( 95 ) $ 3,675,184 $ 6,958,468

Shareholders' equity, December 31, 2020 266,464 $ 2,665 $ 3,261,412 $ ( 145 ) $ 3,306,057 $ 6,569,989

7 unchanged sentences

Other comprehensive income — — — 50 — 50

Shareholders' equity, March 31, 2021 263,637 $ 2,636 $ 3,274,154 $ ( 120 ) $ 3,408,604 $ 6,685,274

Shareholders' equity, June 30, 2021 260,067 $ 2,600 $ 3,280,779 $ ( 95 ) $ 3,675,184 $ 6,958,468

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

($000’s omitted)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

22 unchanged sentences

Repayments of notes payable ( 4,152 ) ( 797,395 )

Borrowings under revolving credit facility 110,000 —

Repayments under revolving credit facility ( 110,000 ) —

Financial Services repayments, net ( 183,307 ) ( 59,193 )

Debt issuance costs ( 11,167 ) —

Stock option exercises — 11

33 unchanged sentences

Other expense, net consists of the following ($000’s omitted):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Write-offs of deposits and pre-acquisition costs $ ( 4,503 ) $ ( 1,866 ) $ ( 8,013 ) $ ( 3,235 )

8 unchanged sentences

Home sale contract assets consist of cash from home closings held in escrow for our benefit, typically for less than five days, which are considered deposits in-transit and classified as cash.

Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $ 998.9 million and $ 844.8 million at March 31, 2022 and December 31, 2021, respectively.

Contract liabilities include customer deposits related to sold but undelivered homes, which totaled $ 1.0 billion and $ 844.8 million at June 30, 2022 and December 31, 2021, respectively.

Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit.

13 unchanged sentences

Insurance brokerage commissions relate to commissions on homeowner and other insurance policies placed with third-party carriers through various agency channels.

Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $ 47.2 million and $ 44.3 million at March 31, 2022 and December 31, 2021, respectively.

Our performance obligations for policy renewal commissions are considered satisfied upon issuance of the initial policy, and related contract assets for estimated future renewal commissions are included in other assets and totaled $ 49.5 million and $ 44.3 million at June 30, 2022 and December 31, 2021, respectively.

Earnings per share

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Net income $ 652,435 $ 503,399 $ 1,107,158 $ 807,506

13 unchanged sentences

Substantially all of the loans originated by us are sold in the secondary mortgage market within a short period of time after origination, generally within 30 days.

At March 31, 2022 and December 31, 2021, residential mortgage loans available-for-sale had an aggregate fair value of $ 510.3 million and $ 947.1 million, respectively, and an aggregate outstanding principal balance of $ 512.7 million and $ 924.5 million, respectively.

Net gains from the sale of mortgages were $ 52.4 million and $ 77.4 million for the three months ended March 31, 2022 and 2021, respectively, and have been included in Financial Services revenues.

At June 30, 2022 and December 31, 2021, residential mortgage loans available-for-sale had an aggregate fair value of $ 553.8 million and $ 947.1 million, respectively, and an aggregate outstanding principal balance of $ 553.9 million and $ 924.5 million, respectively.

Net gains from the sale of mortgages were $ 45.1 million and $ 56.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 97.5 million and $ 134.2 million for the six months ended June 30, 2022 and 2021, respectively, and have been included in Financial Services revenues.

Derivative instruments and hedging activities

We are party to interest rate lock commitments ("IRLCs") with customers resulting from our mortgage origination operations.

At March 31, 2022 and December 31, 2021, we had aggregate IRLCs of $ 981.9 million and $ 337.9 million, respectively, which were originated at interest rates prevailing at the date of commitment.

At June 30, 2022 and December 31, 2021, we had aggregate IRLCs of $ 1.5 billion and $ 337.9 million, respectively, which were originated at interest rates prevailing at the date of commitment.

Since we can terminate a loan commitment if the borrower does not comply with the terms of the contract, and some loan commitments may expire without being drawn upon, these commitments do not necessarily represent future cash requirements.

2 unchanged sentences

Forward contracts on mortgage-backed securities are the predominant derivative financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is sold to an investor.

At March 31, 2022 and December 31, 2021, we had unexpired forward contracts of $ 1.2 billion and $ 903.0 million, respectively, and whole loan investor commitments of $ 254.3 million and $ 310.0 million, respectively.

At June 30, 2022 and December 31, 2021, we had unexpired forward contracts of $ 1.7 billion and $ 903.0 million, respectively, and whole loan investor commitments of $ 316.2 million and $ 310.0 million, respectively.

Changes in the fair value of IRLCs and other derivative financial instruments are recognized in Financial Services revenues, and the fair values are reflected in other assets or other liabilities, as applicable.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments.

There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

Gains and losses on IRLCs and residential mortgage loans available-for-sale are substantially offset by corresponding gains or losses on forward contracts on mortgage-backed securities and whole loan investor commitments.

We are generally not exposed to variability in cash flows of derivative instruments for more than approximately 60 days.

The fair values of derivative instruments and their locations in the Condensed Consolidated Balance Sheets are summarized below ($000’s omitted):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Other Assets Accrued and Other Liabilities Other Assets Accrued and Other Liabilities

6 unchanged sentences

We assess and monitor each counterparty’s ability to pay amounts owed by considering contractual terms and conditions, the counterparty’s financial condition, macroeconomic factors, and business strategy.

At March 31, 2022 and December 31, 2021, we reported $ 198.0 million and $ 208.4 million, respectively, of assets in-scope under ASC 326, "Financial Instruments - Credit Losses".

At June 30, 2022 and December 31, 2021, we reported $ 199.9 million and $ 208.4 million, respectively, of assets in-scope under ASC 326, "Financial Instruments - Credit Losses".

These assets consist primarily of insurance receivables, contract assets related to insurance brokerage commissions, and vendor rebate receivables.

Counterparties associated with these assets are generally highly rated.

Allowances on the aforementioned in-scope assets were not material as of March 31, 2022.

Allowances on the aforementioned in-scope assets were not material as of June 30, 2022.

New accounting pronouncements

On January 1, 2021, we adopted Accounting Standards Update ("ASU") No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes" ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

Our adoption of ASU 2019-12 did not have a material impact on our financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, as amended by ASU 2021-01 in January 2021, which provides optional expedients and exceptions for applying U.S.

13 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Interest in inventory, beginning of period $ 158,670 $ 193,352 $ 160,756 $ 193,409

11 unchanged sentences

We record any such write-offs of deposits and pre-acquisition costs within other expense, net.

During the three months ended March 31, 2022 and 2021, we recorded $ 3.5 million and $ 1.4 million, respectively, of such charges.

We recorded $ 4.5 million and $ 1.9 million of such charges during the three months ended June 30, 2022 and 2021, respectively, and $ 8.0 million and $ 3.2 million during the six months ended June 30, 2022 and 2021, respectively.

If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity.

No VIEs required consolidation at either March 31, 2022 or December 31, 2021 because we determined that we were not the VIEs' primary beneficiary.

No VIEs required consolidation at either June 30, 2022 or December 31, 2021 because we determined that we were not any VIE's primary beneficiary.

Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements.

The following provides a summary of our interests in land option agreements as of March 31, 2022 and December 31, 2021 ($000’s omitted):

March 31, 2022 December 31, 2021

The following provides a summary of our interests in land option agreements as of June 30, 2022 and December 31, 2021 ($000’s omitted):

June 30, 2022 December 31, 2021

Pre-acquisition

22 unchanged sentences

($000’s omitted)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Northeast $ 248,454 $ 285,874 $ 412,785 $ 462,342

20 unchanged sentences

(a) Other homebuilding includes the amortization of intangible assets and capitalized interest and other items not allocated to the other segments.

Other homebuilding also includes a loss on debt retirement of $ 61.5 million in the three months ended March 31, 2021 (see Note 4 ).

Other homebuilding also includes insurance reserve reversals of $ 49.1 million and $ 55.2 million for the three and six months ended June 30, 2021, respectively (see Note 8 ), and a loss on debt retirement of $ 61.5 million in the six months ended June 30, 2021 (see Note 4 ).

PULTEGROUP, INC.

2 unchanged sentences

($000’s omitted)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Land-related charges (a) :

4 unchanged sentences

Texas 294 263 534 791

West 591 ( 19 ) 728 65

Other homebuilding — — — —

3 unchanged sentences

($000's omitted)

March 31, 2022

June 30, 2022

Construction Land Under

54 unchanged sentences

(b) The carrying value of senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes.

In the three months ended March 31, 2021, we retired $ 426.0 million of senior notes at their scheduled maturity date and also accelerated the retirement of $ 200.0 million and $ 100.0 million of our unsecured notes scheduled to mature in 2026 and 2027, respectively, through a cash tender offer.

In the six months ended June 30, 2021, we retired $ 426.0 million of senior notes at their scheduled maturity date and also accelerated the retirement of $ 200.0 million and $ 100.0 million of our unsecured notes scheduled to mature in 2026 and 2027, respectively, through a cash tender offer.

The retirement resulted in a loss of $ 61.5 million, which includes the write-off of debt issuance costs, unamortized discounts and premiums, and transaction fees.

2 unchanged sentences

Other notes payable

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $ 40.9 million and $ 40.2 million at March 31, 2022 and December 31, 2021, respectively.

Other notes payable include non-recourse and limited recourse notes with third parties that totaled $ 40.5 million and $ 40.2 million at June 30, 2022 and December 31, 2021, respectively.

These notes have maturities ranging up to three years , are secured by the applicable land positions to which they relate, and generally have no recourse to other assets.

The stated interest rates on these notes range up to 6 %.

Such notes payable issued to acquire land inventory totaled $ 0.7 million and $ 12.4 million in the three months ended March 31, 2022 and 2021, respectively.

Such notes payable issued to acquire land inventory totaled $ 4.5 million and $ 29.4 million in the six months ended June 30, 2022 and 2021, respectively.

Revolving credit facility

We maintain a revolving credit facility (the "Revolving Credit Facility") maturing in June 2023 that has a maximum borrowing capacity of $ 1.0 billion and contains an uncommitted accordion feature that could increase the capacity to $ 1.5 billion, subject to certain conditions and availability of additional bank commitments.

The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, with a sublimit of $ 500.0 million at March 31, 2022.

The interest rate on borrowings under the Revolving Credit Facility may be based on either the London Interbank Offered Rate ("LIBOR") or a base rate plus an applicable margin, as defined therein.

We had no borrowings outstanding at either March 31, 2022 or December 31, 2021, and $ 289.9 million and $ 298.8 million of letters of credit issued under the Revolving Credit Facility at March 31, 2022 and December 31, 2021, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth, a minimum Interest Coverage Ratio, and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility).

As of March 31, 2022, we were in compliance with all covenants.

Our available and unused borrowings under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $ 710.1 million and $ 701.2 million at March 31, 2022 and December 31, 2021, respectively.

In June 2022, we entered into the Third Amended and Restated Credit Agreement (the "Revolving Credit Facility"), which replaced our previous credit agreement.

The Revolving Credit Facility contains substantially similar terms to the previous credit agreement, increased our borrowing capacity, and extended the maturity date from June 2023 to June 2027.

The Revolving Credit Facility has a maximum borrowing capacity of $ 1.3 billion and contains an uncommitted accordion feature that could increase the capacity to $ 1.8 billion, subject to certain conditions and availability of additional bank commitments.

The Revolving Credit Facility also provides for the issuance of letters of credit that reduce the available borrowing capacity under the Revolving Credit Facility, up to the maximum borrowing capacity.

The interest rate on borrowings under the Revolving Credit Facility may be based on either the Secured Overnight Financing Rate ("SOFR") or a base rate plus an applicable margin, as defined therein.

We had no borrowings outstanding at either June 30, 2022 or December 31, 2021, and $ 347.0 million and $ 298.8 million of letters of credit issued under the Revolving Credit Facility at June 30, 2022 and December 31, 2021, respectively.

The Revolving Credit Facility contains financial covenants that require us to maintain a minimum Tangible Net Worth and a maximum Debt-to-Capitalization Ratio (as each term is defined in the Revolving Credit Facility).

As of June 30, 2022, we were in compliance with all covenants.

Our available and unused borrowings under the Revolving Credit Facility, net of outstanding letters of credit, amounted to $ 903.0 million and $ 701.2 million at June 30, 2022 and December 31, 2021, respectively.

Joint venture debt

At March 31, 2022, aggregate outstanding debt of unconsolidated joint ventures was $ 64.7 million, of which $ 41.0 million was related to one joint venture in which we have a 50 % interest.

At June 30, 2022, aggregate outstanding debt of unconsolidated joint ventures was $ 70.7 million, of which $ 42.4 million was related to one joint venture in which we have a 50 % interest.

In connection with this loan, we and our joint venture partner provided customary limited recourse guaranties in which our maximum financial loss exposure is limited to our pro rata share of the debt outstanding.

1 unchanged sentence

Pulte Mortgage maintains a master repurchase agreement with third-party lenders (as amended, the "Repurchase Agreement") that matures on July 28, 2022.

The maximum aggregate commitment was $ 460.0 million at March 31, 2022 and increases to $ 550.0 million on June 27, 2022, which will then continue through maturity.

The maximum aggregate commitment was $ 550.0 million at June 30, 2022, which continues through maturity.

Borrowings under the Repurchase Agreement are secured by residential mortgage loans available-for-sale.

The Repurchase Agreement contains various affirmative and negative covenants applicable to Pulte Mortgage, including quantitative thresholds related to net worth, net income, and liquidity.

Pulte Mortgage had $ 396.1 million and $ 626.1 million outstanding under the Repurchase Agreement at March 31, 2022 and December 31, 2021, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Pulte Mortgage had $ 442.8 million and $ 626.1 million outstanding under the Repurchase Agreement at June 30, 2022 and December 31, 2021, respectively, and was in compliance with all of its covenants and requirements as of such dates.

Shareholders’ equity

In the three months ended March 31, 2022, we declared cash dividends totaling $ 36.5 million and repurchased 10.3 million shares under our repurchase authorization for $ 500.0 million.

In the three months ended March 31, 2021, we declared cash dividends totaling $ 37.3 million and repurchased 3.3 million shares under our repurchase authorization for $ 153.7 million.

On January 31, 2022, the Board of Directors increased our share repurchase authorizations by $ 1.0 billion.

At March 31, 2022, we had remaining authorization to repurchase $ 957.6 million of common shares.

In the six months ended June 30, 2022, we declared cash dividends totaling $ 72.0 million and repurchased 17.4 million shares under our repurchase authorization for $ 794.2 million.

In the six months ended June 30, 2021, we declared cash dividends totaling $ 74.1 million and repurchased 6.9 million shares under our repurchase authorization for $ 353.7 million.

On January 31, 2022, the Board of Directors increased our share repurchase authorization by $ 1.0 billion.

At June 30, 2022, we had remaining authorization to repurchase $ 663.3 million of common shares.

Under our share-based compensation plans, we accept shares as payment under certain conditions related to stock option exercises and vesting of shares, generally related to the payment of minimum tax obligations.

In the three months ended March 31, 2022 and 2021, participants surrendered shares valued at $ 13.6 million and $ 10.6 million, respectively, under these plans.

In the six months ended June 30, 2022 and 2021, participants surrendered shares valued at $ 13.6 million and $ 10.6 million, respectively, under these plans.

Such share transactions are excluded from the above noted share repurchase authorization.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our effective tax rate in the three months ended March 31, 2022 was 24.2 % compared to 22.8 % for the same period in 2021.

Our effective tax rate in the three and six months ended June 30, 2022 was 24.5 % and 24.4 %, respectively, compared to 21.3 % and 21.9 %, respectively, for the same periods in 2021.

Our effective tax rate for each of these periods differs from the federal statutory rate primarily due to state income tax expense.

The 2021 tax rate also included a benefit for federal energy efficient home credits, which expired at December 31, 2021.

At March 31, 2022 and December 31, 2021, we had net deferred tax liabilities of $ 39.9 million and $ 26.5 million, respectively.

The 2021 tax rate also included a benefit for federal energy efficient home credits, which expired at December 31, 2021, and a reduction in valuation allowances relating to projected utilization of certain state net operating loss carryforwards.

At June 30, 2022 and December 31, 2021, we had net deferred tax liabilities of $ 47.3 million and $ 26.5 million, respectively.

The accounting for deferred taxes is based upon estimates of future results.

2 unchanged sentences

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes.

We had $ 22.7 million and $ 22.5 million of gross unrecognized tax benefits at March 31, 2022 and December 31, 2021, respectively.

Additionally, we had accrued interest and penalties of $ 3.1 million and $ 2.9 million at March 31, 2022 and December 31, 2021, respectively.

We had $ 23.7 million and $ 22.5 million of gross unrecognized tax benefits at June 30, 2022 and December 31, 2021, respectively.

Additionally, we had accrued interest and penalties of $ 3.4 million and $ 2.9 million at June 30, 2022 and December 31, 2021, respectively.

Fair value disclosures

19 unchanged sentences

Fair values for agency residential mortgage loans available-for-sale are determined based on quoted market prices for comparable instruments.

Fair values for non-agency residential mortgage loans available-for-sale are determined based on purchase commitments from whole loan investors and other relevant market information available to management.

Fair values for IRLCs, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on

Fair values for non-agency residential mortgage loans available-for-sale are determined based on

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

market prices for similar instruments.

purchase commitments from whole loan investors and other relevant market information available to management.

Fair values for IRLCs, including the value of servicing rights, and forward contracts on mortgage-backed securities are valued based on market prices for similar instruments.

Fair values for whole loan commitments are based on market prices for similar instruments from the specific whole loan investor.

2 unchanged sentences

If quoted market prices are not available, fair values are based on quoted market prices of similar issues.

The carrying value of senior notes was $ 2.0 billion at both March 31, 2022 and December 31, 2021 .

The carrying value of senior notes was $ 2.0 billion at both June 30, 2022 and December 31, 2021 .

Commitments and contingencies

2 unchanged sentences

The majority of these letters of credit and surety bonds are in support of our land development and construction obligations to various municipalities, other government agencies, and utility companies related to the construction of roads, sewers, and other infrastructure.

We had outstanding letters of credit and surety bonds totaling $ 289.9 million and $ 1.9 billion, respectively, at March 31, 2022 and $ 298.8 million and $ 1.8 billion, respectively, at December 31, 2021.

We had outstanding letters of credit and surety bonds totaling $ 347.0 million and $ 2.1 billion, respectively, at June 30, 2022 and $ 298.8 million and $ 1.8 billion, respectively, at December 31, 2021.

In the event any such letter of credit or surety bond is drawn, we would be obligated to reimburse the issuer of the letter of credit or surety bond.

22 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Warranty liabilities, beginning of period $ 106,640 $ 83,807 $ 107,117 $ 82,744

23 unchanged sentences

IBNR represents losses related to claims incurred but not yet reported plus development on reported claims.

Our recorded reserves for all such claims totaled $ 644.3 million and $ 627.1 million at March 31, 2022 and December 31, 2021, respectively.

Our recorded reserves for all such claims totaled $ 652.7 million and $ 627.1 million at June 30, 2022 and December 31, 2021, respectively.

The recorded reserves include loss estimates related to both (i) existing claims and related claim expenses and (ii) IBNR and related claim expenses.

Liabilities related to IBNR and related claim expenses represented approximately 69 % and 70 % of the total general liability reserves at March 31, 2022 and December 31, 2021, respectively.

Liabilities related to IBNR and related claim expenses represented approximately 74 % and 70 % of the total general liability reserves at June 30, 2022 and December 31, 2021, respectively.

The actuarial analyses that determine the IBNR portion of reserves consider a variety of factors, including the frequency and severity of losses, which are based on our historical claims experience supplemented by industry data.

10 unchanged sentences

Adjustments to reserves are recorded in the period in which the change in estimate occurs.

We reduced general liability reserves by $ 49.1 million and $ 55.2 million during the three and six months ended June 30, 2021, respectively, as a result of changes in estimates resulting from actual claim experience being less than anticipated in previous actuarial projections.

These changes in actuarial estimates did not involve any changes in actuarial methodology but did impact the development of estimates for future periods, which resulted in adjustments to the IBNR portion of our recorded liabilities.

Costs associated with our insurance programs are classified within selling, general, and administrative expenses.

Changes in these liabilities were as follows ($000's omitted):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Balance, beginning of period $ 644,278 $ 653,068 $ 627,067 $ 641,779

6 unchanged sentences

Estimates of anticipated recoveries of our costs under various insurance policies or from subcontractors or other third parties are recorded when recovery is considered probable.

Such receivables are recorded in other assets and totaled $ 57.5 million at both March 31, 2022 and December 31, 2021.

Such receivables are recorded in other assets and totaled $ 49.2 million and $ 57.5 million at June 30, 2022 and December 31, 2021, respectively.

Those receivables relate to costs incurred to perform corrective repairs, settle claims with customers, and other costs related to the continued progression of construction defect claims that we believe are insured.

12 unchanged sentences

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets and lease liabilities were $ 71.0 million and $ 88.5 million at March 31, 2022, respectively, and $ 74.3 million and $ 92.7 million at December 31, 2021, respectively.

In the three months ended March 31, 2022 and 2021, we recorded an additional $ 0.5 million and $ 1.1 million, respectively, of lease liabilities under operating leases.

Payments on lease liabilities in the three months ended March 31, 2022 and March 31, 2021 totaled $ 5.5 million and $ 5.3 million, respectively.

ROU assets and lease liabilities were $ 70.8 million and $ 87.2 million at June 30, 2022, respectively, and $ 74.3 million and $ 92.7 million at December 31, 2021, respectively.

In the three and six months ended June 30, 2022, we recorded an additional $ 3.7 million and $ 4.2 million, respectively, of lease liabilities under operating leases, and $ 12.0 million and $ 13.1 million in the comparable prior year periods.

Payments on lease liabilities in the three and six months ended June 30, 2022 totaled $ 5.6 million and $ 11.1 million, respectively, and $ 5.2 million and $ 10.5 million in the comparable prior year periods.

Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of less than one year.

In the three months ended March 31, 2022 and 2021, our total lease expense was $ 12.9 million and $ 10.2 million, respectively, inclusive of variable lease costs of $ 2.2 million and $ 1.9 million, respectively, as well as short-term lease costs of $ 5.1 million and $ 2.9 million, respectively.

Sublease income was de minimis.

In the three and six months ended June 30, 2022 our total lease expense was $ 13.4 million and $ 26.2 million, respectively, and $ 10.3 million and $ 20.6 million in the comparable prior year periods.

Our total lease expense is inclusive of variable lease

PULTEGROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The future minimum lease payments required under our leases as of March 31, 2022 were as follows ($000's omitted):

costs of $ 2.2 million and $ 4.4 million in the three and six months ended June 30, 2022, respectively, and $ 2.2 million and $ 4.0 million in the comparable prior year periods, as well as short-term lease costs of $ 5.5 million and $ 10.5 million in the three and six months ended June 30, 2022, respectively and $ 3.1 million and $ 6.0 million in the comparable prior year periods.

Sublease income was de minimis.

The future minimum lease payments required under our leases as of June 30, 2022 were as follows ($000's omitted):

Years Ending December 31,

2 unchanged sentences

Present value of lease liabilities (d)

(a) Remaining payments are for the nine months ending December 31, 2022.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $ 3.1 million of legally binding minimum lease payments for leases signed but not yet commenced at March 31, 2022.

(a) Remaining payments are for the six months ending December 31, 2022.

(b) Lease payments include options to extend lease terms that are reasonably certain of being exercised and exclude $ 2.5 million of legally binding minimum lease payments for leases signed but not yet commenced at June 30, 2022.

Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.2 years and 5.5 %, respectively, at March 31, 2022.

(d) The weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 5.2 years and 5.5 %, respectively, at June 30, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements